Gladstone as Chancellor The Exchequer brought fame to Gladstone but in return Gladstone raised the office to the forefront of politics. John Maloney explains. ested in him and his themes and in the House Gladstone was Chancellor of the Exchequer from – and again from –, first as a Peelite where his dazzling wonders were performed. and then as a Liberal. (In – and again in – Earmarking public , as Prime Minister, he would be his own Chancellor.) He first arrived at Downing Street expenditure after destroying Disraeli’s budget of on the floor If you cut government spending, you cut the budget deficit. Since the converse does not of the House of Commons, bringing down the necessarily apply, the level of public spending government, and thus earning the right and even must, logically, take precedence over the bal- the duty to bring in a budget of his own. It turned ance of the budget. Such was Gladstone’s atti- tude: except in wartime, when, typically, a de- out to be the opening act not just of the most famous gree of resignation over the level of public of all Chancellorships but of the Exchequer’s ascent spending was compensated by an extra degree to one of the three great offices of state, ranking of determination to avoid borrowing, if at all possible. only behind the premiership and the Foreign Office. Gladstone had the bad luck to begin and And Gladstone’s accession also initiated a public end his first Chancellorship in tandem with the finance where necessary taxes no longer had to be Crimean War. In his budget he ruled out (for the time being) borrowing to cover the cajoled out of a grudging Parliament muttering expenses of war, quoting Mill’s Principles to the ceaselessly about executive extravagance. For this, as effect that: ‘if capital taken in loans is abstracted we shall see, Gladstone must take much of the credit. from funds either engaged in production or destined to be employed in it, their diversion It was the style as much as the content of a from that purpose is equivalent to taking the Gladstone budget which marked him out from amount from the wages of the working the first. However austere the message, its de- classes’. livery yielded an intense and invariable pleas- Gladstone went further: unless they were ure to Gladstone and almost everyone else. So, sent the bill here and now, ‘the community’ when things went right, did the results: John would continue to extol the ‘pomp and cir- Morley, in his Life of Gladstone, attributed ‘a cumstance, glory and excitement’ of war at the carnal satisfaction’ to his chief when ‘the pub- expense of its miseries. His actual response was lic revenue advanced by leaps and bounds. De- to double income tax for a period of six months ploring expenditure with all his soul, he still only, arguing that after six months the war rubs his hands with professional pride at the would either be over or, in all probability, no elasticity of the revenue under his manage- longer supportable without borrowing. He ment.’ proved himself wrong: with higher income tax, Popular appreciation reassured Gladstone plus higher duties on spirits, sugar and malt, that his delight was a legitimate one. Morley’s he was able to run a surplus throughout the biography is full of the ‘enchaining’ and ‘de- Crimean War. But he continued to eschew the lighting’ of audiences on the subject, dull in dogma that all war spending must always be anyone else’s hands, of public finance. financed by tax increases or spending cuts else- Just as Macaulay made thousands read his- where: and when in Stafford Northcote tory who before had turned from it as dry and attributed the doctrine to him, Gladstone was repulsive, so Mr Gladstone made thousands swift with a letter of rebuke. eager to follow the public balance sheet, and More than one Chancellor has toyed with the whole nation became his audience, inter- the idea of earmarked taxation, where specific 12 journal of liberal democrat history 20: autumn 1998 tax levies finance specific types of another matter: liamentary whim. Gladstone had spending. Gladstone, by contrast, at persuaded even the radicals, in Pro- TAXPAYERS! Read Mr Cobden’s times came close to earmarked pub- fessor Parry’s words, that: ‘the fight new pamphlet, the ‘THREE PAN- lic spending, under which the bill for for economy no longer had to be ICS’, and judge for yourselves. How particular projects was to be sent to conducted against the state.’ long will you suffer yourselves to be those who had made the most noise Humbugged by PALMERSTON- on their behalf. The poor, he said, IANISM and Robbed by the ‘Serv- had demonstrated the largest appe- Putting employment ices’, and others interested in a War tite for the Crimean War. He there- Expenditure, even in times of Peace? first fore refused to let the whole bur- ... THE CHANCELLOR OF THE den fall on the better-off. However, There were two kinds of Gladstone EXCHEQUER APPEALS TO when in he came to look back budget: those with and without an YOU TO HELP HIM. You have the on the increased spending of the last extended lecture on the principles power in your own hands if you will few years, he judged it to be mainly of taxation. Some of the lecturing, only exert it. Reform the House of the fault of the more prosperous as in the budget, was little more Commons, AND DO IT THOR- classes, and so had no compunction than an engaging historical canter OUGHLY THIS TIME. in raising income tax from d to d through the precedents. Full-scale to make them pay. Gladstone’s position was not an al- sermons tended to attach themselves There was no equivalent of the together easy one. Unwilling to em- to the budgets of other Chancellors: Crimean War in Gladstone’s second brace the thoroughgoing anti-colo- notably Disraeli in and Sir Chancellorship (–), so his fo- nialism of the Manchester School, George Cornewall Lewis in . cus switched from containing the and on his own admission increas- Lewis had drawn on the authority consequences of public spending to ingly inexpert in the technical ar- of Arthur Young to argue that effi- bringing it down. (Within two days guments on which the Admiralty ciency and fairness alike demanded of resuming office in he was based its demands, he could do no a multiplicity of taxes. ‘If I were to proposing a reduction in British better than an intermittent guerrilla define a good system of taxation, it forces in the Pacific.) Gladstone’s at- campaign against the majority Lib- should be that of bearing lightly on titude to defence spending pleased eral view as led by Palmerston. But an infinite number of points, heav- Cobden and Bright, but Palmerston it was Gladstone and Palmerston’s ily on none.’ The reader, John Morley had few problems in carrying the complementarity, not any episode of commented in his Life of Gladstone, bulk of the Liberal Party with him. antagonism, Previous Parliaments’ grudging atti- which set the tude to almost any military spend- seal on mid- ing had left Britain with outdated Victorian public and inadequate defences – apparent finance. The enough even before the Crimean Prime Minister’s War revealed the full poverty of case for ex- equipment and organisation alike. penditure, com- Now Palmerston demanded more bined with the ships, better fortifications against Chancellor’s eye France and, in , better living for anything that conditions for soldiers and armour- could be con- plated ships – provoking another res- strued as unnec- ignation threat from Gladstone. essary spending, ’s budget statement dissected convinced Lib- the trend. First, said Gladstone, there erals and Con- was the ‘growth of real permanent servatives alike, wants of the country: wants which not just that any it is desirable to supply, and to which remaining taxes if you were to deny fitting supply, were necessary, you would be doing current public but also that mischief.’ Fears about national se- governments curity had contributed their share, must be allowed as had the desire to keep up with to plan the fiscal other countries’ military expendi- future reason- ture. Palmerston could hardly have ably uninter- objected to any of this: the current rupted by the placard seen around Manchester was accidents of Par- journal of liberal democrat history 20: autumn 1998 13 would have no difficulty in believ- bread, but rather had ‘created a regu- Had income tax at its rate of – ing how speedily ‘this terrible her- lar and steady trade which may be been in place throughout the Na- esy’ would have ‘kindled volcanic stated at £l,, a year.’ De- poleonic Wars, he continued, the flame in Mr Gladstone’s breast’. mand for labour had thus risen ‘and conflict would have left no burden Gladstone’s first reaction was to it is the price their labour thus of debt. But this gave rise to parallel note in his diary, contra Lewis, the brings, not the price of cheapened arguments for retaining income tax necessity of simplifying the fiscal sys- commodities, that forms the main at other times, as Peel had recognised tem ‘by concentrating its pressure on benefit they receive.’ when, in , he had ‘called forth a few well-chosen articles of ex- Inevitably the process of scrapping from repose this giant, who had once tended consumption.’ To charges tariffs and duties on this – or any shielded us in war, to come and as- that his own measures had lacked the other – basis brought protests about sist out industrious toils in peace.’ finesse of a Cornewall Lewis, instead ‘class legislation’ from those consum- The trouble began when a country now benefiting one class, now pe- ers who thought they were too near dependent on indirect taxes for its nalising another, with large changes the back of the queue and (in the main revenue then added income tax in simple taxes, Gladstone replied case of tariffs) producers who to pay for supposedly temporary that the benefits of lower taxes and thought they were too near the front.